ISLAMABAD: Receivables of the country’s largest oil supplier have reached an all-time high of Rs302.5 billion, which reflects the continuation of chronic circular debt.

State-owned Pakistan State Oil (PSO) has reported to the federal government that its receivables, mostly emanating from the power sector, increased to Rs302.5bn as of Oct 12, gradually inching up from Rs248bn on the same day last year.

The company’s receivables at the end of the PPP’s government peaked at Rs220bn in May 2013. The PML-N government cleared a circular debt worth Rs480bn through a controversial scheme of cash and book payments.

To highlight its financial sufferings, the company’s management has told the government that around 88.5 per cent, or Rs267bn, of its total dues was held up with the usual culprit – the power sector. The power sector’s unpaid bills outpaced PSO’s total receivables. This is evident from the fact that the power sector’s payables of Rs214bn to the oil supplier accounted for 87pc of total receivables last year, an official said.

Non-payments can lead to an oil supply crisis

As if that was not enough, the public sector had the biggest chunk of payables to PSO with Rs158bn on Oct 10 compared to Rs135bn a year ago. Another Rs75bn was outstanding against Hub Power Company and about Rs34bn against Kot Addu Thermal Power Company – both depend on payments by power companies of the government to clear their dues to fuel suppliers.

Another Rs25bn was reported outstanding against other public-sector entities, including payables by Pakistan International Airlines (PIA) and price differential claims payable by the federal government.

Another Rs10bn was reported outstanding against Sui Northern Gas Pipelines Ltd (SNGPL) on account of liquefied natural gas (LNG) supplies.

Mainly because of these receivables, PSO has outstanding international and local liabilities stockpiled at Rs87bn. These include around Rs71bn worth of letters of credit and standby letters of credit opened in favour of Kuwait Petroleum, Qatargas and other LNG suppliers to ensure smooth supplies. Around Rs16bn is payable by PSO to the local refineries.

Non-payments could create an oil supply crisis, the government has been warned. Also, the recent plunge in the stocks of petrol was attributed to cash-flow constraints as PSO struggled to make up for lower inventories and imports of private-sector suppliers with a substantial increase in its market share.

A senior PSO executive declined to comment on the subject, saying the company was constantly engaging with the Ministry of Energy, Ministry of Finance, PIA and the SNGPL for the release of funds. “Despite increasing challenges on the liquidity front, PSO is continuing to ensure the availability of petroleum products on its fuel stations across the country and sometimes making up for the shortfalls of others,” he said.

Published in Dawn, October 14th, 2017